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A Proportional Hazards Model of Bank Failure: An Examination of Its Usefulness as an Early Warning Tool

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The large number of bank failures in recent years has created incentives for both regulators and providers of funds to identify high-risk banks accurately. One potentially cost-effective way to do this is through use of a statistical "early warning model." In this article, the author shows that a Cox proportional hazards model can identify both failed and healthy banks with a high degree of accuracy using a relatively small set of publicly available data.


Suggested citation: Whalen, Gary. “A Proportional Hazards Model of Bank Failure: An Examination of Its Usefulness as an Early Warning Tool,” Federal Reserve Bank of Cleveland, Economic Review, vol. 27, no. 1, pp. 21-31, 03.01.1991.

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